Exposed! The MMM Family’s 2016 Spending!

Well, I might as well come clean on our spending for last year. It either went up, or way up, depending on how you want to account for things.

Every year, this annual report seems to come out a little bit later – mostly because I’m no longer all that interested in how much money we spend. And Mrs. Money Mustache, my faithful assistant in creating these reports in past years, has disappeared completely from the blog – justifiably more interested in her Etsy Shop than family finances. Such is the nature of retirement.

If you are early on in your journey to financial freedom, you should not do what we are doing. Until you have your finances on auto-pilot so that you are saving 50-75% of your income, you should absolutely be reviewing every piece of spending and adding up all the categories.

But we’re all done saving for retirement. Our cash outflows feel both luxurious and reasonable, and they are well below the retirement income budget, so it seems less and less necessary to measure them.

After all, if you are happy with your body composition, do you still need to keep measuring every calorie you eat? If your breathing is clear and uninterrupted, do you track your annual number of breaths?

But our Supposedly Low Spending has kind of become my brand. And because of that, there are even conspiracy theories that form around this spending:

“There’s no way he’s making that much money and only spending $25k.”

“Oh, looky there.. Mustache bought an electric car as an “experiment”. I wonder if that will show up on their annual spending!”

“How much of his [travel/entertainment/home renovation/marijuana] expenses is he hiding from us as business expenses?”

So I thought I could do things a little differently this year. I can share the normal family expenditures as well what our businesses spent, and everything in between.

The Basic Expenses

Here’s the familiar chart, updated for 2016, complete with last year’s numbers for comparison.

Category

2015

2016

Comments

Mortgage Interest

0

0

If we had a $400,000 loan at 4%, we would have paid $16,000 in interest (!)

Property Taxes

1411

1895

Massive house price increases in my neighborhood come at a cost (prices have doubled in 4 years).

Food and Dining

7,400

6,807

Groceries

6,232

5,980

A warehouse store opened up in town, within biking distance of home. This reduced grocery costs a little as I shifted more purchases there. See article: Killing your $1000 Grocery Bill

Wine/Beer

627

321

Fewer large parties this year (boo), plus we cut down our glass-of-wine-or-beer-with-dinner habit (yay!). But many people have been giving me free boxes of beer in exchange for helping them with stuff, which probably makes this cost artificially low.

Restaurants, Coffee Shop

541

506

Mrs. and Little MM started ordering fancy pizza deliveries every time I'm out on a trip.

Medical

3,733

10,868

Here's where the costs went way up this year.

Doctor Visits

0

3807

My poor little lad broke his arm on December 30th (fell from a play structure while playing with me!)

Health Insurance

3,000

6720

A new Kaiser health insurance plan. (A downside of the ACA for those with higher incomes)

Dentist

256

256

Pharmacy

42

0

Aspirins, bandages, toothbrushes, and such included under "groceries". Thankfully no prescriptions for any of us this year.

I negotiated a lower rate for part of the year, then ditched Comcast for Longmont's amazing Gigabit Fiber service ($50/month for 1000 Mbit/S access! - Nerdvana!)

Home

<120>

1696

Home Renovations

120

1696

Finish materials for my house and the homes of some friends/family. Does not include the $30k detached Studio I built.

Home Insurance

0

0

Still self-insured for the primary house. Please don't complain about this in the comments section ;-)

Gifts/Donations

1,747

2000

Does not include donations made by the business.

Crossfit/Yoga

230

150

School Tuition

0

0

Little MMM was back to 100% public school this year, due to increased confidence/toughness in getting over anxiety. Go little man! But we also do a shitload of learning at home, because it's fun.

Misc

3095

2,564

Shoes & Clothing

754

622

Lots more fancy stuff for the gang from Gap, Old Navy, etc.

(my clothes are mostly free stuff, thrift shop or included in grocery receipts from Costco)

Sporting Goods

0

98

Sweet Compound Bow and arrows!

Shopping Misc

1,274

1000

Mostly at Amazon - household/kitchen goods and computer parts

Books, games, gifts

488

383

Other

580

422

Stuff I am too lazy to sort out. If something is not listed, assume it is here.

Travel

2,376

2,335

Flights to Florida in January, Canada in July and December,

TOTAL

$23,941

$30,193

Adding in our artificially high medical costs is what did this budget in.

Subtracting Tuition, Donations

22,194

28,196

Subtracting travel, crossfit

19,588

25,861

Subtracting organic/luxury food

17,531

23,614

Assuming a 33% increase on groceries due to organic + meat.

Subtracting home renovation expense

17,411

About $22,000

This is what our "no frills" living cost would be (although you could subtract another $6,000 if we had a lower income and qualified for the health insurance subsidy)

So What is Mr. Money Mustache Hiding From Us?

In a word: Nothing – this is my best guess at what our true expenses would be, if we lived a normal, retired life.

But here are the exceptions and special situations, which you can account for however you like:

Higher Income is forcing me to pay full-price for health insurance. Health insurance pricing comes on a sliding scale from “nearly free” below $25,000 in family income, up to full price for incomes over $80,000 (see subsidy calculator)

But then again, our family business (of which we are employees) pays these premiums on our behalf, so they are pretty painless

I built this nifty studio, spending about $30,000 in the process. Is it spending, or investment? Since it increases the value of the house by much more than that amount, and I will be selling this house and moving somewhere else eventually, I chose to treat it as investment. On the other hand, spending money on repairs, changing paint colors, gardens, or swimming pools would count as spending to me, since these items are more likely to be recurring and/or not recouped at the time of sale.

I bought a Nissan Leaf for roughly $14,000 after all costs. This was $9,000 more than I got for selling the old Scion xA. Is this spending? Well, I definitely would not have bought it if it weren’t for the blog (it served as a strong form of advocacy) and I think it may have actually made a noticeable difference in US Leaf sales numbers – which was my main purpose. Sure is a nice car, but we barely use cars for personal purposes (I had to become an Uber driver in order to even get enough drive time to properly test the car!)

In late 2016, I gave away $100,000 of this blog’s income to various charities, with much more to come. Having a business that makes and gives away money probably reduces the need to give away my real retirement savings.

Travel as Mr. Money Mustache (trips to Ecuador, Los Angeles, Portland, Seattle, and a couple of other places) added up to about $4,000 between flights, hotels and food. None of this is stuff I would have done for personal fun, but it may have burned me out enough that I skipped or missed other personal trips (camping, etc) that would have increased my travel spending.

Mrs. Money Mustache’s Etsy shop spent more than $20,000 on materials, shipping, tools, etc. Most of this went right back out the door and earned a profit, but you could argue that both of our business expense accounts satisfied our “spending desire”, displacing personal spending in some way. In fact, writing for you consumes so much of my limited free time, that it may prevent me from expanding into other, more expensive hobbies (like upgrading my mountain bike or snowboard gear).

Overall, it looks like another fairly reasonable year. The biggest lesson that I try to emphasize is that spending does not have to scale with income. We spent less than 10% of our taxable income this year, and still cannot see any reason to inflate the lifestyle any further than it is already.

It’s a beautiful life!

Unrelated but Special Thanks to a Reader: Over the last few months, a lot of technical stuff has gone on behind the scenes here. If it weren’t for some serious help from skilled tech people, this blog’s heavily used forum would no longer be functioning.

I wanted to thank Kevin Clack – aka Clack Consulting for stepping in to upgrade the forum and continuing to help me with necessary fixes to this day. And if you have a well-established business with technical and web presence needs, you may even be able to become one of his clients as well.

I agree. Inspiring. And, MMM, as far as I’m concerned, it would be no big deal if your spending bumps up as your net worth does. You don’t have to feel like you are in a straight jacket because of your “brand.” We are all working to optimize things here, and that calculation will likely shift to some degree (though perhaps not a ton) based on the assets we have.

MMM, does it bother you at all ( at ALL?!) that 36% of your Entire Annual Spending is in medical (mostly insurance) costs? To me it seems that there is something seriously wrong with the system.
I am almost ready for my Early Retirement but a thousand bucks in insurance per month keeps me working for now. Mostly out of Great Irrational Fear though… the numbers are OK.

F..ck…!!!!!!!!!!! should we all mustachians with reasonable handle of our health and fitness all get together and negotiate a much better plan for our group?

I also retired early at 52, but our annual spending is around $57K. Kind of embarrassing since it’s just me and Mrs. Freaky Frugal. This includes rent since we sold our home and downsized into the city. We could easily chop out $10K by moving to cheaper digs, eating out less, and traveling less.

But according to my calculations with CFiresim, we are spending $35K less than we can afford to spend. So like you it is getting a LITTLE harder to get excited about saving money. I still get plenty excited though. :)

Anyway, MMM, you’re my hero because you inspired me to retire back in 2012. I’ll be forever grateful.

The idea of tracking your spending so closely when you no longer have to seems a bit of a pain to me. Once I get to a position even half of yours, you can be sure my close scrutiny of my spending will disappear and I’ll just ride my good spending habits all the way to the bank.

Anyway it actually looks like most of your costs went down, which is brilliant.

Was waiting for this post, I love comparing numbers. It always inspires me to see what else I can optimize. Your spending was 15% lower than ours, particularly in the utilities and auto/transport categories. Time to up my game!

Great post. There’s a really good point made in ‘The Richest Many in Babylon’ – there is only so much food I can eat, there are only so many places I can sleep, etc. There are limits to what a person can consume, beyond that it’s just waste.

How many houses do you need? How many Rolex watches can you wear at a time? Then you realize, you don’t need a Rolex watch (first since Swiss watches are super delicate and break) because you can get the time, anytime, on your fancy supercomputer managed by satellites (called a cellphone).

After a certain point, who are you trying to impress? And then you realize, none of it matters. I will impress you with my wit, charm, and intelligence. The money is an abstract concept. And if you don’t like me, then to heck with you.

In the meantime, the funds grow, the Stash builds, and you create a thing called LIFE. Instead of being this consumption Zombie, you are AWAKE.

In the land of the Blind, the one-eyed Man (or woman) is King . . . and the man (or woman) with the Stash is stylin!

Totally reasonable. Our spending last year was 38k including mortgage interest, and travel. Our booze and travel costs are a good bit higher than yours, but over time I expect it will settle down… Maybe :)

I feel like we are living like kings. It doesn’t take much to live very well, and we are in CT. Not the cheapest of places..

Something to keep in mind: Since the Mustache family has insurance, they actually only pay the negotiated rate. Sadly, uninsured folks pay considerably more than people who have insurance for the same procedure, even if the insurance company pays nothing.

Can confirm. I am “self insured”, and we get major “discounts”… At least that’s what they call them on our bills. It does help that we pay upfront for appointments, and early / often for bigger bills (maternity and delivery). The relationship between hospitals and the insurance industry seems such that prices are massively inflated to keep profits moving and liabilities low (every link in the chain is covering their butts). Self insured patients often get the “real” price.

Or you could be us, in Florida, with a partial ($300 per month) subsidy and still paying $7,800 per year for a $6000 deductible policy for just one of us! I know a retired couple in Georgia with a high deductible policy who pay $12,000 per person per year – also on the national affordable health care plan. Thank goodness I am going on Medicare next month, my rate with a supplement will drop to about $320/month, no deductible. I am thankful that we could afford the high premiums due to savings.

This is the one spending issue that legitimately scares me as to a reasonable estimation of what it will cost me if did ER in my 40’s – the rest I agree with MMM that it’s all controllable if set your mind to it. It’s unlikely I would get an ACA subsidy and with kids it would be >25% of my spending before even getting actual healthcare (premiums ). At what point is healthcare so expensive it’s not worth early retirement in the US?

ShaneMay 21, 2017, 9:49 am

You can also wait for the bill to come in and negotiate a lower pay it all right now amount, they prefer that compared $50 a month for years.

I believe one of the largest problems with the system right now is no upfront pricing. Every purchase my household makes is an educated well thought out decision based on cost and true need. Once you walk through the door of an ER your at their mercy. Something like an MRI can be thousands of dollars difference depending where you go, but most times they send you where they want you to go.

Yes, I have had similar issues for years. For one thing, if you go to the ER, there is no way to guarantee an in-network doctor. Same with anesthesiologists–they are assigned by the hospital and rarely are they in any PPO network.

Sadly, neither Obamacare or Trumpcare appear to do anything that would force providers to give upfront pricing, neither do they allow insurance companies to sell across state lines.

It seems to me that government interference from both sides has only exacerbated the problems.

Meanwhile, procedures like Lasik and cosmetic, driven by the invisible hand of market forces, have become better and more affordable.

Luís MarquesJune 12, 2017, 4:19 am

That’s because the invisible hand of the market doesn’t have the same kind of leverage on patients with cosmetic procedures.

AllisonMay 22, 2017, 12:56 pm

I can confirm this as well. It’s not the case everywhere, but I worked in one clinic that offered a 30% discount to all self-pay patients, as long as they paid on the date-of-service. This is because so much time and resources are spent on dealing with insurance companies, changing policies, 20-minute phone calls, claim denials and re-submissions… Now I always ask about cash payment discounts, and almost every place has at least a 10% break.

Well, I’m happy to stand corrected. My belief was based on a physician’s appointment which it turned out my insurance didn’t cover. Even though I checked with the office to make sure I would be covered, I think there was confusion because they were about to start taking my insurance. When I got the bill and explanation of benefits, I learned that I was being asked to pay the entire cost. They were not willing to cut me a break, even when I called and explained the situation.

It’s good that my experience was unusual. Perhaps if I’d known in advance I wouldn’t be covered and if I’d made arrangements in advance, I’d have received a lower rate. It’s always nice to learn the world is a little better of a place than I thought.

I have a high deductible health plan at my company and we pay $3k each to meet the deductible before the insurance kicks in. My husband had pneumonia last year and we hit the $3k threshold and that was about it.
This break-down was a big eye-opener for me thinking about our retirement strategy and the recent developments with ACA going away. We are close enough to the border that we can get generic prescriptions from Mexico for much cheaper.
We could also go to Mexico for procedures, but my husband is an illegal immigrant, so I am the only one who could still come back to the US. Possibly a retirement strategy, but my husband does not want to leave the country after living in the US for over 30 years. We shall see what interesting opportunities life holds for us and keep our options open. :)

Yeah Gwen – and that was just for the first late-night visit to the urgent care center of the Children’s Hospital, where they straightened out the arm and gave him the first cast.

In January and February there were several less expensive follow-up visits for X-rays and a series of smaller casts.. you’ll see those bills on the 2017 report :-)

I found the experience educational though – I had always wondered how much it actually costs to get fixed up in a US hospital. This was a major forearm arm break, but no surgery was required. For a bigger incident requiring a surgeon (even a broken ankle like I had at age 21), I imagine you’d get into the five figures very quickly.

MMM, I moved our family this to MediShare, which is an allowed exception to the ACA. It has been great so far; highly recommend it. Premiums for my family of five are $212 a month with a $10k deductible. No brainer.

The other problem w/ health sharing ministries is that they disproportionately attract healthy people. Once those people start becoming sick, it is likely that premiums will skyrocket, because the healthy folks will drop out. There is also no legal protection against unpaid claims, and they often do not cover the range of things insurance companies do.

For people who can self-insure as a fallback, this is fine. For others, less so.

Seems that similar to all insurance, people will age out at 65 and move to medicare. I’ve done significant research on these plans and they are more restrictive than an ACA plan, such as pre existing conditions are phased in over several years. The deductibles are generally much more reasonable. Prescription coverage is also lacking. Expenses that are not covered, such as phase in of pre existing conditions are put out to members for help on a needs list which can be donated to directly.

At least one of the sharing services has an over 30 year history, large cash reserves and very modest cost structure. I would hope that other organizations could use similar models to provide a lower cost catastrophic plan for any one. Perhaps a dream…

It’s important to realize that this is not “insurance” and isn’t covered by all the rules and regs of your state for insurance companies. You might wish for those regs if you ever had a catastrophic medical issue that could break the not-quite-an-insurance co.

I do not disagree with what you are saying. But traditional health insurance is also not exactly insurance. I see it as more prepaid medical care with an insurance policy tacked on to cover catastrophic expenses. With the exception of the high-deductible policies (which have been somewhat curtailed under ACA), traditional insurance is like buying auto-collision insurance that would also cover routine maintenance costs.

I agree with your post. Years ago I noticed when my health insurance started to go up at a higher rate was when they made preventative care part of it. Many people are going to the doctor and having tests that they don’t really need simply because they’re told that “it’s included”.

You don’t have to identify as Christian, but agree with their “shared beliefs” which are pretty religious sounding, but open to interpretation, many people interpret it as a set of beliefs around freedom of religion.

YMMV, I have no experience working with them.

Think you were joking, but probably can’t open a new Health Share and be ACA exempt. Exemption only applies to Health-shares that already existed before a certain date.

Sigh. Shortly after the turn of the millennium, I had one wisdom tooth pulled in North Carolina: a little more than $500. Years later, I had one pulled when back in Taiwan for a visit (it’s where my wife’s family is from and where I lived for 14 years previously). The cost was about $35, without insurance, in a nation with purchasing power parity per capita slightly higher than Germany’s.

As the rest of the developed world knows, medical services don’t have to be this expensive….

For others out there who are self-employed and big savers with income too large for a subsidy, you can open a solo 401k and sock away quite a bit of income that might be enough to get you into the subsidy range. We have saved much more than usual over the past couple of years specifically for this reason. We would be paying $15,600 per year in premiums but instead pay $3000 because we save the maximum in retirement accounts.

My son broke his leg. Standard tibia/fibula fracture, not compound, but did require pins. Total cost was close to $50k. Most of that was initially covered by insurance, but taking this chance at a public PSA, since there are a lot of DIYers here. Make sure to include paying back your insurance, when settling a personal injury. They generally are owed reimbursement, if you are compensated for an injury.

I totally hear you about no longer being interested in these numbers. I reached my goal weight and fitness level last year, and did some serious tracking and testing on my path to to get there. Now that I’ve been there for an extended period of time, I can’t be bothered with the tracking.

Hmmm. Guess you are a better man than I. A few years ago at age 46 I embraced counting calories and hit a relatively badass weight (- 70 after a whole life lived from chubby to too damn big and back and forth). I still count every calorie because it’s way too easy to creep back up given my love of foods and sugar. So I’d just say, before you give it up make damn sure you no longer need it.

Have a similar issue with spending. Spent many years at a fairly low income for a family of four with a stay home Mom. Finally making good money and allowing the wife a few wins (have spent ridiculous amounts on two rooms full of new furniture, despite my desire to shop on eBay (or not at all….) and although I’m saving significantly (about a third) it feels like I’m off the rails with this new found income.

Maybe some of us just have the wrong personalities for easy maintenance. Perhaps I need to stop in to the face punch shop.

That’s a great observation, swaayze – personality type and habits can really differ from one person to another, so you need to do what works for your type. I have always been into delayed gratification (or self-denial), since early childhood.

Like, I’d spend my Saturday cutting my parents’ enormous lawn to earn a $5.00 bill, which I would then save for a year or more before spending it on a major purchase. I still have this trait – I almost never eat anything with sugar, because I don’t want the future punishment of obesity or heart disease.

But this isn’t a sign of my personal awesomeness or virtue or an incredible power to resist pleasure: it’s just brain wiring. I get MORE pleasure from doing things this way. If I didn’t, I would do them the other way. Most of us are just machines floating around seeking pleasure. So you need to find a way to trick yourself into behaving in the way that leads to the most lasting types of the stuff – which takes some self-knowledge.

Buddhism talks about three different responses to a stimulus: passion, aversion, or indifference.
For example, how do you feel about chocolate?
Could you rhapsodize about the finest Criollo cocoa beans on http://www.gimmeechocolaterightnow.com?
Passion.
Do you lecture people about the evils of fat, sugary cocoa butter because you would never let it touch your virgin mouth?
Aversion.
Are you part of the 0.00001 percent of the population who doesn’t think much about chocolate, one way or another?
Indifference.
Passion. Aversion. Indifference.
One chocolate bar. Three different reactions.
In the same vein, keeping your weight or expenses down might inspire passion, aversion, or indifference. Like MMM said, none of these things are intrinsically superior, some of it is hard-wired, and your reaction will probably evolve over your lifetime. So congrats on keeping fit and frugal. It doesn’t matter how you get there or stay there. We’re on the same road.
Cheers,
Melissa
who thought a lot about Buddhist principles for her book “Buddhish.”

Her yoga place charges $10 per visit, and it averaged out to 1.5 paid times per month this year (an excuse to socialize with friends). And the ladies have been using the neighborhood city rec center (or our equipment here at home) for workouts.

City rec centers would make a great “Get Rich With:” post. I just started hitting our local pool after 4 years of living a half mile walk from it. All of the fitness and relaxation, none of the chemical bills.

Wow, thanks for the continued encouragement. It’s so encouraging to see how you’re keeping your lifestyle and expenses similar even though we all know you could spend so much more without even hesitating. Kudos to you.

We’ve made huge progress towards reducing our spending similarly. And always great to read about your latest projects, too; I can see myself doing those types of things more someday soon too.

I’ve been reading you a long time, and what strikes me as most interesting is how consistent your expenses are year in and year out. And I like that you don’t have a lot of lifestyle creep going on as your income keeps going up.

My budget has stayed similarly fixed, regardless of overall wealth and income. I guess we just know what we value and have cut out the rest.

Still impressively low spending, especially on the food and dining and auto/transport. I disagree with your point that you don’t need to measure spending if you’re well below budget or well below unexpected post-retirement income. Because if you don’t measure, you don’t know, and the numbers could creep up, and income numbers can change too. It’s not the same as breathing, which is an autonomic function. You’re still doing a very good job of tracking spending.

The biggest takeaway for me is life changes over long periods of time, and people who retire early may not always want to continue doing what they had envisioned doing in retirement (ie, they might want to start working again, in some modified form).

I’d love to see a post on how much time you spend on your businesses. Ie, how much *time* is invested weekly/monthly into them. I’m not going IRP on you, just thinking the risk to working during retirement is the work could eventually morph into a *job*. I know you say you like it (some of it) but many people say that about their jobs, and later eventually get tired of them. Having the courage to then step away is harder than one thinks.

“Because if you don’t measure, you don’t know” – true, but you can measure the difference between income and spending much more easily than a full budget, i.e. by adding the balance of your accounts/portfolio every 1 January and removing capital gains/losses.

We live in the same town, Longmont, and I have 2 questions. How much one way to DIA and do you find the Sam’s club worth it? I haven’t been there and only go to Costco, but would check it out if worth it. My wife has experience with Sam’s and says Costco is much better.

Uber rides are about $65 to the airport, which is $35 for me after using one of the many $30 referral credits I have in my account. The new “Green Ride” shuttle is $38 and will soon be $28 if you take it from the downtown hub. Much better price if you’re traveling alone.

I agree that Costco is much better than Sam’s – mainly just because they are run by a good corporation rather than Wal-mart. But Sam’s still has great products, and the nearest Costco is 20 miles away.

It’s not even an option for Mr. Money Mustache to drive 40 miles roundtrip to get groceries, so I had to combine Costco with other trips out that way, which were really rare.

I was surprised too that (1) you only spent $70 to get to and from DIA from Longmont for what seemed to be at least half a dozen trips, and that (2) a frugal, value-hunting person like you would splurge on Uber or Lyft (even with $30 discount coupons) when you could take the RTD AB airport bus from Boulder for $9 (including the transfer from Longmont to Boulder on the BOLT). I agree that if the whole family is traveling, Uber is the way to go, but if you’re traveling solo, the RTD AB Skyride is very nice and leaves hourly starting at 3:30 am. I often think to myself when I’m on the bus that the bus seats are more comfortable than the airplane seat I just left. FYI, when the RTD revamped the Boulder/Denver routes last year, they also loped off a couple stops from the AB airport route and now the trip is shorter and travels on E-470 with no traffic tie-ups. I take it about twice a month using my Ecopass for a “free” ride (not really free because the Ecopass is added to my property tax) and I love it. Try it!

Another really great option is to park for free (up to 30 days) at one of Denver’s park-n-ride lots and take the bus to DEN. Bus fair is ~$9 per rider (and you could always drop the family off first, then go park). This works better for us coming from further away (Ft Collins). Just double-check you’re using a free lot and you’re good.

Great post, always interesting to see your spending breakdown which helps emphasize you really do walk the walk with minimal spending despite the high income from the blog and other sources.

My small suggestion would be to get a new credit card or two each year to reduce those flight expenses to under $100, but that depends if you value the few extra hours per month being worth the ~$2k. Depends on what else you’re doing with your free time, but should be worth the trade-off for most people still on the path to FI.

Yes! I do actually rotate through credit cards at least a couple/few per year. Chase cards are my first choice, but I have maxed out their cash back per person for this year so I’m working through Brandon’s list here on my own credit cards page of this site.

Although some of the tickets were purchased with points, I still accounted for them as cash spending here on this budget, just to keep things clearer.

That’s great! Do you just count the cheapest equivalent cash flight against your expenses when you book something with points? So far, I’ve been treating any points/miles earned as “free” and only counting the taxes and fees that go with the tickets against my expenses.

For any cashback, it just gets put in the bonus income column and anything it might be used for (travel or otherwise) gets counted as expenses.

I wonder why that relatively pricey insurance doesn’t cover more of the little one’s broken arm? What’s the point of insurance if you can’t utilize it, am I right?
Otherwise, impressive restraint as always and awesome charitable giving!

We have the same thing and we made sure our plan is HSA compatible so we can then contribute to our HSA, which adds quite a lot of savings dependent on our income bracket for the year. One of the best features is that you can make qualified HSA purchases but spend the money out of your regular account and then withdraw those purchases from your HSA years down the road, letting your HSA grow tax-free. MMM and some other bloggers wrote some great posts about how to do this successfully.

Awesome numbers. I like the added color on a few items. That should help keep some of your naysayers at bay.

I still personally love your food/dining numbers at $498 per month, and low transport costs. We usually spend anywhere from $300-$400/mth for two people, and that’s with buying a lot of organic food. We just set a couple rules at the store to keep spending in check, and the rest is a cakewalk.

My biggest challenges with people are these two areas. Many can’t cook so they continue to eat out, and not always at cheap places. Even those that do cook I routinely see grocery budgets at $700-1200/mth for 2-4 people on top of frequent, and large restaurant spending. While the grocery spending is not always completely out of line with national averages, we have to be better than average to get ahead.

Transport is always a tough one too. Cars are like an addiction. It doesn’t matter how much they cost. Many people refuse to give them up. Even when someone can’t afford the car they will not budge an inch on that section of a budget. That makes it hard to help when they represent large parts of overall spending that are more easily changed than housing for example.

A favorite of mine recently came from someone I happened to start talking finances with. They mentioned rather high spending on books at bookstores, which they concluded was a good thing. When I recommended the library I was informed of their viewpoint “I don’t like waiting in line for my turn to read a book”. To each their own I guess.

I was impressed by how willing my local library was to accommodate requests. I suggested them getting “Early Retirement Extreme” *** as I wanted to read it again. They replied that they would get a copy with their next order!

(I didn’t have to request “The Simple Path to Wealth” that MMM gave forward to as my library already had it! Awesome!)

While I’m not certain they would do this every time and for any book, it’s pretty amazing to think I could request any book I want to read (within reason) and they would likely acquire it on my behalf at no expense to me! (And in fact they will deliver any book they have to the patron’s nearest library branch.) Talk about a land of extravagance!

*** I have a PDF copy, however I have a preference of reading actual books, as I get tired of staring at the computer screen.

I’m a bit embarrassed to write how much my husband and I spend on food a month, especially given that we both cook quite a bit. Tell me the couple of rules you set at the store – maybe it could help us.

Not using the library also incurs the cost of shelves, dusting and periodically recycling.
I just love the rich feeling of walking in the door at The Berkeley Public Library and knwing I can have any book I want, No expense. Yeah. That is truly wealthy. I have occasionally waited a week or 2 when I requested a book. I do fear the bookstores will eventually vanish if I don’t support them though.

I think this is amazing. It is clearly a sign of a veteran blogger when you address all the stuff that the complainers and nit-picker are going to whine about and address them in advance! I love your blog and use it so much for reference and motivation when the cultural norm’s of spend, spend, spend start to win out of the ‘buy your freedom first’ message. It is wonderful to see people living their dreams and sharing their journey with the world, even it means exposing themselves to the miserable, jealous, bitter naysayers of the world. It looks like the past year was a good one for the MMM family and I look forward to following to see what the next year has in store!

I admire how closely you track all of your expenses, down to the specific comments that go along with each. I also admire how much you gave away of your blog’s revenue. That is just awesome. Hopefully it inspires others to be generous with their money as well!

Your budget demonstrates just how helpful it can be to have a paid off house when you enter “retirement”. Our current yearly expenses amount to around $50,000. $20,000 of this is used to rent a two bedroom unit in a 4-plex in Anchorage. Without this housing cost, our fixed expenses would only be around $30,000 per year. It requires a much larger nest egg to support yearly spending of $50,000 compared to $30,000!

The value of your house is part of your net worth, so tax advantages of homeownership aside, it doesn’t really require a larger nest egg to rent in retirement. It’s just that a homeowner implicitly has the same “larger nest egg” partly invested in their house, while a renter would keep that in other investments (such as index funds).

Andrew, you make a great point. There is lots of opportunity cost with paying the principal of the house faster vs. investing in mutual funds. I’m pulling the plug on 6/30 and while I’ve gone back and forth the past couple of years regarding whether I should pay it off or not, I finally settled on being patient and simply making the minimum payment. When you factor in my extremely low fixed rate (3.279%) and the tax benefit of the interest deduction, my real interest rate is lower than the rate of inflation. Intuitively, I always knew this but the debt averse part of me won the emotional argument sometimes. Renting is also way more flexible, too! In my opinion, paying off the house is a purely personal preference type of decision, yes, it lowers your monthly and annual needs, but to lower those need you have given up a sizable portion of your investments. How sizable depends on where you live….

To me, the housing mortgage (or lack thereof) should be thought of as part of your fixed income portion of your net worth.

For example, let’s say you have a $3 million net worth, including $400k house with 0 mortgage. If the rest of your $2.6 million net worth was in stocks and rental properties, that would equate to 13.3% of your net worth is effectively in bonds (3.279% in your case). (My retirement target is ~$3 million and I want about 30% in bonds so I’d simply buy $500k in various bonds/bond funds to go along with my $400k “mortgage bond” that is my lack of mortgage payment and the remaining $2.1 million in more aggressive investments)

I agree that there is an opportunity cost to tying up assets in a house vs. investing in stocks with a higher expected return. Assuming that you are planning to settle down in a specific area, the decision of whether to rent or buy depends on many factors. There is a great NYT calculator showing how these variables might affect your decision. One of the variables is the price to rent ratio in that city. A lower price to rent ratio would favor buying over renting. In Anchorage, the price to rent ratio is around 21. This means that a rent of $20,000 per year is equivalent to a $420,000 house. Some may feel more comfortable retiring with $1 million in invested (income-producing) assets (not including the house), a paid off 420K house, and yearly expenses of $30,000. Others may feel more comfortable retiring with $1.42 million in invested (income-producing) assets, and yearly expenses (including rent) of $50,000. This math would be completely different if you wanted to settle down in San Francisco (Price to rent ratio 46, favors renting) or San Antonio, TX (Price to rent ratio 14, favors buying).

Sorry Live Free MD, but $20,000 in rent a year in Anchorage gets you nowhere near renting a $420,000 house. Your rental in the 4-plex is worth less than $200,000, and this is exactly what $20,000 a year in rent gets you in Anchorage.

I like to rent, I like the freedom. Now I own (in Anchorage) and my $1600 a month mortgage payment is on a house worth a little less than $300,000. And it is much nicer than any 4-plex I ever lived in and with a 9000 sq. ft. lot. Totally different lifestyle.

Agreed! When I try to compare my spending with MMM’s, I usually at $16000 for the year to account for the fact that he has $400k+ locked into his house that he could otherwise be getting 4% on in cash and spending on rent. Even that included, he spends a very reasonable amount of money. But I do think it’s important to add that number for those who compare their cost to his and pay rent/mortgage.

I see you list cutting back Organic/Luxury food as a valid option. I get cutting Luxury food, but is cutting Organic really a smart move in terms of long-term health?

There is a Happiness Return On Investment (HROI) for being physically health and food has a big influence on that. Where does the trade-off for food quality begin and end? You could cut back some, but it would be really cheap to eat Ramen Noodles every night. Just don’t expect healthy very long.

We try to be smart about buying organic stuff where it makes sense at the lowest cost we can find. A good start for us is the Dirty Dozen List of foods.

Yeah, except I don’t think of organic food as being more healthy in most cases (although I do agree with the “dirty dozen” concept for watching out for certain pesticide-heavy fruits.)

I think the organic food and anti-genetic-modification (GMO) movement has become overly emotional and less grounded in science than it could be. Which is understandable, because the dickish behavior of some of the old agriculture/food companies makes us assume EVERYTHING they are doing (rather than just part of it) is evil.

On the other hand, the TYPE of food you choose to eat makes a huge difference in your health. A “standard agriculture” salad with loads of different types of vegetables is infinitely better for you than, say, a can of soda made with organic cane sugar or some organic white bread.

I mainly try to choose certain things in organic style for environmental and animal welfare reasons. For example, organic pasture-raised chicken and eggs are good stuff, compared to the caged factory farm option.

Even this is a slippery slope, since many types of organic production actually increase the amount of land you need to use to raise it.

So far, it seems the only super-easy answer to great protein sources and sustainable farming is.. Insects!!.. more on our 2-year exploration of that later :-)

Mmm can you please clarify your gmo position? You state you are anti-gmo, but also call to bring on the science? I sort of feel like you meant to say you are not anti gmo and made a typo. (I don’t mean to ‘correct’ you to any pro or anti gospel, I am just curious about that sentence.)

Here in the U.S. when we consider whether to go organic we are thinking of ourselves and our own health. But what about the folks who raised and harvested that food? I lived in a South American country several years back. Whether a banana is organic or not doesn’t make any difference to the person who eats it (you don’t eat the peel, after all). But those people who worked on the banana plantations (owned by rich multinational companies) often came down sick because of the intensive use of pesticides. Miscarriages, birth defects, learning disabilities and physical disability were not uncommon. When an employee fell too ill to work (often a permanent disability), he was fired and the family lost their source of income. They often ended up having to leave and going to the capitol city to seek work (difficult to find, especially for someone from a rural area) – it’s hard to support a family by selling cigarettes one-by-one on the street corner, school for the kids was out of the question. While it may be that the big banana producers have changed to less lethal pesticides in the last few years, I cannot justify choosing to pay 65¢ less per pound for bananas to save money if it means a kid might be born with birth defects. Again, this might have changed – and this is personal for me because of what I witnessed – but the only ethical choice for me is to eat organic bananas. I’m sure there are other equally depressing examples one could find for other food items, so when I don’t eat what I grow I try to either buy local or buy organic.

There are unfortunately two sides to that particular coin too. I know that where I grew up there was an organic dairy a few doors/fields/miles down. Organic farmers are constantly in danger of losing everything. This dairy had one cow come down with some illness (I don’t remember what it was exactly or I’d be more specific) and it shut down the whole farm. Companies couldn’t be guaranteed that ANYTHING was safe from them. The only buyer was a local cheese factory that probably had to do a lot of extra testing to ensure their product was safe. The dairy farm was eventually shut down and the farmers moved away.

It is a common misconception that organic food doesn’t have pesticides. That is a faulty misconception. Indeed, organic food frequently has much higher amounts of (“organic”) pesticides than conventional produce as the “organic” pesticides are less effective than synthetic.

Depends, Rob. In fact, one thing I don’t like about organic certification is that it covers a huge range of systems and practices. You can have organic monocultures that indeed use pesticides that might actually be quite harmful to workers. You can also have conventional farms that use integrated pest management (IPM), depending mostly on natural enemies of crop pests and spraying only as a last resort (I’ve seen a couple of fascinating presentations from entomologists about that kind of thing).

Unfortunately, our economic system being what it is, most conventional farms use pesticides and herbicides on a predefined schedule that leads to resistance and the need to develop new substances that may be more toxic than the ones we already have. IPM doesn’t fit well into an economic model that encourages overproduction and cost-cutting.

Whether organic farms are better probably depends on who runs them and how. I personally appreciate being able to visit local farms and decide for myself whether I like what they do, but you can’t do that for everything you eat, and some people don’t have that option at all.

“I think the organic food and anti-genetic-modification (GMO) movement has become overly emotional and less grounded in science than it could be. Which is understandable, because the dickish behavior of some of the old agriculture/food companies makes us assume EVERYTHING they are doing (rather than just part of it) is evil.”

Yes, this. I’m seeing very unfortunate polarization between the anti-everything people and those who claim our current ag/food system is the only possibility. There’s so much more to it than that!

About the organic-uses-more-land point – that’s more or less true, but there are a few other things to consider as well. This is something that’s getting me worked up right now, so I’m going to launch into a totally uncalled-for lecture…

First, we already produce about 3000 calories per person per day, and roughly 1/3 of that is wasted. We could already feed the world’s population with less land if we really wanted to, especially if we grew food for direct human consumption instead of funneling it through animals first (I grant that livestock farming can be a good use of land that’s not suitable for crops, but that’s not what the current system is based on).

Second, the amount of land that is used in practice is only loosely related to per-acre yields. Brazilian rainforest is being cut down to produce soybeans for livestock feed, not for heirloom tomatoes.

Also, organic yields are lower by only about 20% on average. If we invested the same amount of money into research on organic agriculture that we have into synthetic-input-based agriculture, then I wonder what yields we could achieve without the big environmental problems we have now?
(Btw I do recognize that “organic” covers a very wide range of systems and practices, and isn’t necessarily synonymous with “sustainable”.)

Sadly, while I like the concept of low-pesticide-content food, the “organic” labelling in the supermarket is problematic. It doesn’t mean what most people think it means. Plenty of organic farms use pesticides; as long as the pesticides are naturally* sourced, they’re still allowed to call the food organic. Sometimes they even use a greater quantity of pesticides than you see in many non-organic farming operations (if what they’re using is less effective than the synthetic pesticides). Sometimes this is more ecologically harmful than the synthetic pesticides would be, and leads to a greater pesticide content in the produce than you’d otherwise get.

*and “natural” doesn’t at all mean “safe” or “healthy”. I wish people wouldn’t draw that false equivalency. Arsenic is natural; doesn’t mean you should eat it.

I think mostly the only effective thing you can do in this area is buy locally and talk to the producers, so you know how the food was grown. Or grow your own, of course. Which is great, but more difficult in some climates than others (speaking as someone living in a, hmm, agriculturally disadvantaged climate ;) ).

(This all reminds me of egg labeling, where “free range” can mean *worse* conditions for the chickens, not better. Labels. Sigh.)

There is very, very little evidence that organic is healthier at all than their conventional alternative, much less to say justify the cost increase; and I say that as someone who worked in an upscale grocery chain with well over 150 stores that sold a ton of organics. If you focus on just eating “real” foods – ie non processed – you’ll be just fine. The reason most people who eat “organic” feel better (besides the placebo effect) is because they aren’t eating processed food and tend to live a more active lifestyle because they care about health. If you follow a paleo or low carb diet with the same active lifestyle, you’ll arrive at the same point for a lot less.

In my opinion, bigger issue with conventional farming is the insane rate of top soil degradation. I plan on living 60 more years, so we need to eventually change some things. Similar to fossil fuels, if we know that we’re going to run out of top soil fairly soon, and when that happens it will be very painful/destructive in the mean time, why not start working towards a sustainable future today?

Not bad. Just a minimal increase of costs with a lot more luxury! Great job! For most working folks, the mortgage seems to be the biggest expense. Get rid of that, work, and you’ve got a great amount of control over your costs.

That’s the trouble with facts, they’re annoying little things that keep blowhards boxed in. No better way to keep doubters on their toes than full transparency. The problem is your spending habits are a huge slap in the face to our consumerist culture. It’s much easier to criticize than to look in the mirror.

I keep having to reel myself in from upgrading my mountain bike, or building an ebike. Luckily I bought to a fairly decent mtn bike before becoming focused on early retirement ;-) If I were in your position, I would be mighty tempted to buy some nice gear and clothes. I won’t judge if you do!

Thanks for doing this.. We did this for one year (spent about $30k) and have not bothered since income was ridiculously high compared to spend. As we are now officially income free (DW retires next month) we should probably add it up again now we will have lots of time on our hands..:)

Ok – I too love your yearly budget and have been following you since the beginning. Decided to click the link on your budget for Geico and just see how much my savings would be….almost passed out – savings of $446.64. Needless to say I am now a member of team Geico. I owe you some beers!

That’s an impressive level of spending and reading the comments it appears that you counted all the travel expenses though some may have been “paid” with points (I was also curious about that). I’ve got a couple of questions for you – do you think that perhaps buying higher quality food might be related to low spending on healthcare, aside from things like broken arms and higher premiums due to income? Perhaps you shouldn’t reduce it by 30% since it might be a tradeoff type of expense? I’m mostly kidding but I still wonder… I’m pretty blown away by how little gasoline you purchase. We have cut back with our Nissan Leaf and my husband bike commuting to work 50% of the time (he is pretty badass but maybe not quite to your level yet, and the rain and dark in the winter ratchet that lower) but spending less than $150/year is amazing. I’ve never been one to keep a tight handle on my budget due to the reasons you discuss above but since I’m retiring on 6/30, I’ve been keeping a keener eye on things to make sure the number I projected still works. Adjusting for housing costs and higher property taxes, we are still about 25% higher across the board. I’ve got some work to do to dial things back a bit more. Thanks for the reminder!

Surf, I think our “secret” is living in a town that is only about 5 miles in each direction. There’s just nowhere that you’d really need a car for local trips. Then, the e-bike or the Leaf can easily get me to Boulder or Denver on those rare times that I need to leave Longmont.

Though I live in a place not quite as convenient as Longmont, I will say that our lifestyle design will allow for a lot more walking and biking especially after work is over since I won’t be in a rush to get everywhere (theoretically). Coincidentally, a Sprouts grocery store is opening in the fall (replacing a lame store that had terrible quality produce and overpriced everything else) walking distance from home. Speaking of groceries that reminds me – eggs – how do you get them home without breaking them? I usually procure mine from Costco and the bike ride home can be pretty bumpy so I’m wondering if you have any pro tips. I wanted to try and run an experiment and track mileage before and after retirement, but I’m kinda lazy with details like that. Did you ever get your solar array working for charging your leaf? Did you have any noticeable pops in your electricity usage? Mine went up pretty dramatically, before I got the solar panels installed, 20-30 miles a day on a 2011 model hit my pocketbook. You may drive so infrequently that it didn’t hit you too hard.

Following up about the gasoline expenses, the (68)% YoY delta is just amazing. Recognizing that the really-low absolute level in 2015 was due to Longmont’s bike-ability, do you attribute the vast majority of the 2016 change to the switch to the Leaf, or was there also a shift in consumption, ie a large decrease in total miles driven, regardless of whether gas or electric?

You need to include imputed rent in your spending numbers, or else they are not really accurate. Otherwise you could live in a vast palace 10x as expensive as your current house and still claim to be spending the same, even though the opportunity cost is much higher and obviously you would be consuming much more. Without the imputed rent included, these numbers are also useless for renters to compare against their own.

After all, should I also include the imputed rent from owning my own car instead of renting it? What about each of my bikes? What about my pants and shirts?

I believe that for any object you choose to add to your life (pants, car, house), you should have the ability to buy it.

And a house or apartment is absolutely not a necessity – you could grab a $5000 trailer or build a tiny house, and live rent-free for life as long as you’re resourceful enough to find a place to park it.

Whether you rent or mortgage it is a separate issue, but in any of the situations if you choose to add the item, you are discarding that amount of effective capital (or the annual cashflow for a roughly equivalent amount of capital) in order to have use of that object.

Now, I have a pretty materialistic life with a lot of fancy stuff. I describe it in pictures and words, but I think it would be confusing to impute rent on it all. So I choose to describe the spending on an actual cash-out basis instead.

I see your point, but I think there is a strong case for treating “housing” different from “any object you choose to add to your life.” Housing is a huge-ass capital expense, and it’s literally required for being alive (outside of weird tiny home edge cases, where it’s only a little-ass capital expense). So you own a fully paid off house. You could have that 500K in the stock market and get dividends and pay rent, or you could have it in real estate. You have it in real estate and get imputed rents.

FWIW, I think the classical economists actually treated land differently from capital and labor. That’s where the economic concept of “rents” for land came from, rather than returns to capital.

But that’s the thing – I am trying to discourage people from assuming housing needs to be a huge-ass capital expense.

If your net worth is less than $500,000, you should not live in a $500,000 house or apartment. It’s completely acceptable to live in a small dwelling you built yourself, or a friend’s basement.

And even to delay child-rearing until you can afford a place to raise them (this is radical stuff I’m saying here, I realize).

On the other hand, I have a wasteful amount of money tied up in my house. It costs me a huge amount of foregone investment returns – but I’m OK with that because I finally have no other better use for that money. Don’t do what Mr. Money Mustache is doing, if you’re 21 years old and trying to get ahead!

Thanks for your transparency. The only thing I would add is that a “regular retiree” should set aside a certain monthly “fee” for house maintenance. Although it great that you only spent $1696 this year, you can foresee, that in the future a retiree will need a new roof, perhaps a new heating unit, etc.

I guess you could budget for things that way, but if you’re a self-funded retiree you have already “set aside” money for every expense for the rest of your life. So on most years, your home maintenance will be only a few dollars. But the money is there in the future when you have to cover a $10,000 replacement or upgrade. I just report that bit of spending in the year that it actually happens.

But we probably agree on the overall point: houses are not free to maintain, so don’t set your retirement savings level so low that you can’t afford anything beyond groceries :-)

Yes, you probably ought to include the opportunity costs of your cars, clothes, etc. in your spending too for maximum accuracy, but generally it’s not worth the accounting hassle. Housing covers a large chunk of that category of “expense” and is easy to account for, so I think it’s worth doing.

Yes you can spend more or less on housing, but pretending you’re not spending anything on it by not accounting for it isn’t really an honest way to make the case for housing frugality. It feels like the opposite: by the same token you could buy a jet share and then pretend that all your travel expenses are free thereafter, because you want to “discourage extravagant travel.” I thought this was supposed to be an accounting of what your expenses are, not what they theoretically could be? I think you make it abundantly clear that you spend well more than the bare minimum and why that is so. The fact that you are okay with your spending because you have no better use for the money doesn’t mean it shouldn’t show up on the ledger!

Let me say I think it’s awesome how you break this down for us every year. Don’t want to be ungrateful for this useful info, which my original post was a little.

MMM, would you consider a housing manifesto post that addresses the recent major rent and home price increases? Five years ago I agreed with you on housing not exceeding your net worth. We’re now feeling like idiots.

We made our FI plan five years ago, saved 70%/invested, and due to huge stock market increases we have much more in net worth than expected. But, unexpectedly due to the epic price increases, if we do buy (or rent) the kind of house we had set our sights on when we made the plan, it still pushes our retirement timeline out by several years. If we would have just bought then we would be FI by now.

Luxurious problems, I know, but it’s making us rethink our principles a little, and we regret not taking on a little more risk with regard to mortgage debt. Based on forum discussions others seem to be in the same boat. I think a lot of folks out there are in need of advice or just some cheerleading with regard to housing.

I think that depends on where you live. Hosing prices where I live did not decrease during the 2007 recession. They have also not increased now during the so called real estate bubble. This is because I live in a very rural, high unemployment, area with little (almost zero) industry. Obviously, I am in a different situation than someone in Los Angeles, Salt Lake, or Denver.

I agree with Andrew it’d be nice to see both numbers, however it’s not really necessary since we can calculate it for ourselves. Assuming, quite conservatively, that imputed rent is 1500/month that’s 18000/year, bringing 2016 total effective costs to 48k. Keeping in mind that is more than is needed (2015 #s would only be 42k).

The numbers are important because people compare them to their own situation to get an idea of what’s realistic. It’s not fair to say housing isn’t a necessity – that one could live in a trailer or a tent – because that’s not realistic for most people (many cities are cracking down on trailers and moving them around, treating them like homeless encampments).

Go easy on MMM here. If you were to go back many years, I am sure that when he bought his house, or improved it, there was an “expense” for it. MMM is just using cash basis accounting vs. that fancy accrual accounting where you try to match the consumption of the asset to the period the asset was used.

If you report home maintenance costs in the year they actually happen, why not include the cost of buying the Leaf in this year’s budget? Yes, retirees (early or otherwise) should have enough set aside to cover both types of costs as they come up, but without a rough “annual budget” that incorporates those types of expenses, the “4% rule” will only cover the annual expenses, and not any of the other big expenses that are part of even a basic budget.

There’s this thing that happens when you start raking in a lot of money – you find very fruitful ways of spending. It be called “profitable consumption,” and even though you are further ahead because of it, which is consistent with early retirement, it is not consistent with frugality.

I won’t criticize your self-insuring your home, but I have to ask how you do it. I’ve always looked at homeowner’s insurance primarily for the liability coverage. If someone trips on a rock in my yard and sues me, my insurer will cover me. Is there some alternative to protect you from this without having homeowner’s insurance?

Right – the key is that no genuine person would actually hurt themselves on my property and want me to pay – because I don’t maintain a grossly negligent and dangerous property.

If such a lawsuit was filed, it would have to be by an opportunistic, dishonest dickhead. Our judges are trained to recognize and not reward this type of exploitation of our legal system. So they wouldn’t win the suit, but I might be out some legal bills. However, I have an amazing law firm (thanks to this blog), and the incident would give me months or years of interesting stories to tell – and the writing would more than pay for the legal work :-)

I’m not sure if that’s necessarily correct – correct me if I’m wrong here. But if a person is injured seriously on your property and needed medical treatment. It does happen even in safe places and that person may not blame you particularly. But can’t that person sue your insurance company for the cost of the medical treatment? Or are they shit out of luck and hope that have good medical insurance. I’m not sure how liability is distributed among insurance companies usually. If you don’t have home insurance then are you forcing this person to be a dickhead to you rather than trying to get some money in a common way from an insurance company?

I would say your greatest liability risk is your sidewalk, especially in the winter. (Slip and fall on ice that you were supposed to remove). The risk is still low overall. Your house can be dickhead free, but it’s harder to keep them from walking (and falling) on your sidewalk.

In general, I take your position that the risk of harm is not worth the cost of insurance. And, then, yeah, You’re probably right.

In Canada where I live, if someone falls on my property or I fall on someone’s, neither of us would ever consider trying to hold the other legally responsible. Our system doesn’t support this, and our taxes more than pay for whatever (“free”) treatment we might need at a hospital. (Thank you MMM for this excellent, informative resource!)

Wow – very detailed right here. I cannot believe the ACA insurance costs that much. I’ve heard about the cost as one of the largest cons to the program, and that number helps me visual/understand better the major con. On top of hat, seems like you have also been hit with the increases in insurance and cost of living that we have been as well. However, your ability to keep expenses to a minimum is very impressive!

To second Rory, states vary widely for health insurance. A good friend of mine was working a contract engineering position w/o benefits in 2009. For health care, he was on a COBRA plan from his previous employer which cost him $1800/month for his healthy family of 4. He quickly found another engineering job with benefits.

We are saving our money at a 50% clip and will be able to spend 100k a year. Our goal is to retire and travel the world. Not interested in just sitting at home. To each his own and there are times when we could eat out but don’t, could fly first class but don’t. We should have $6M portfolio in 3 years when we retire. Then we can go anywhere we want.

Broke my arm mountain biking – cost -zero. That’s the great thing about the UK health service! It is beginning to crumble through misplaced government funding. (Yes the government collect tax to pay for it).

Yes, but there are also lots of treatments the NHS refuses to pay for because they cost too much (like emergent catheterizations for heart attacks). I’ve lived under both systems- you get what you pay for.

Yes, free in australia too and if little MM had this accident in MMM native land, also free. Reading that part of the budget really emphasized the false economy of the health care system in the US.
Michael Moore doco, where to invade next, argues the point well…US taxes and ‘real’ costs…
I find the MMM budgets fascinating insight as the costs of living in the US albeit frugally

Further up in the comments, it was pointed out that the US spends 15% of GDP on healthcare. The equivalent figure in the UK is 11%. We have better health outcomes than the US on just about any measure you can think of, but still not as good as some European countries like France which have a figure more like 12% of GDP. The US system seems crazy inefficient and expensive from an outside perspective.

The UK has the worst cancer survival rates in Europe. Breast and colon have mortality rates on par with much less-developed nations.

HeidiJune 7, 2017, 6:11 am

well…technically not free.Paid by taxes. But, it is a great puzzlement, the US medical system. The finest care if you can afford it. I certainly do not need to purchase medical insurance with my after tax dollars, nor do I need to worry if my child breaks their arm that I will be out of pocket to the turn of MMM. Just a cost that would never feature on my budget. After tax, this arm break is equivalent to feeding a family for a year.Health Care is truly costly in the US, I doubt there is much debate on that point.

In the first half of 2017, my income is roughly $38K and my spending is $24K. Since nearly half of my spending is medical insurance, condo fees, and property tax, it would be difficult to cut spending further. According to my calculations, I have $65K in unspent spending money, and of course income continues to roll in, so I figure I am pretty well set – I can buy what I need without worrying, and the money will be there. Frugality, yes, but not excessive frugality.

Of course, eventually I will have to take social security and make withdrawals from my retirement accounts, but right now they are still increasing, and there is no rush.

Kudos for laying it all out on the line. That’s great. Up above I would agree that if you paid your house off, then it does not need to be in your expenses. You are not suggesting people retire with a huge mortgage. Instead you are saying, plan right, buy reasonably and pay it off. Then you can retire with less necessary annual expense. As for me, the house is an expense right now.

I love Longmont. Been there about 5 times as two of my cousins and an aunt live there. One just sold her house and is moving to Seattle (kids just graduated from a great local public school). She will not be buying in Seattle as the cost for a reasonable home is $$$. I have always enjoyed the beauty of the mountains in the back drop.

Definitely a flat environment allows for biking more easily too. I live on a 900 foot incline from work. It is only 3 miles but the incline still intimidates me.

Just wanted to chime in and repeat the old mantra, “ELECTRIC BIKE, DUDE!!”

If you are physically able and willing to to cycle, and the only issue is something as minor as speed/distance/hill, just get an e-bike and you are done with it. Later, you may even graduate to cranking up that 900 feet entirely on your own, but you can get an immediate win THIS AFTERNOON by ditching a 2-ton gas wheelchair in favor of a swift 2-wheeled life booster.

If you have a big budget and just want the best with no fuss, go get a Stromer bike from your local ebike shop.

Regarding bikes having the right bike makes a HUGE difference. Back visiting family and we joined them for the ride for refuge 25K. Bro in law as per normal left all of us in the dust with my wife trailing way way behind. He kept saying it was the bike not him but we refused to believe him. Finally my wife and him switched bikes and this is shocking part. I wouldn’t of believed it had I not seen it with my own eyes but she went on, same route, to leave all of us in the dust.

That moment radically changed my thinking, so rather than spending 2500€ each on a decent electric bike we’ll spend maybe 500€ getting the right bike!

Still tracking although not tracking… If it only were for the critics, the budget is very detailed and solid. Like the idea that once you adapted your way of living into something that fits your values, the (low) spending is something that automatically happens.

Do you charge the Leaf anywhere besides at home? I realize your miles driven are lower than average (by a long shot) but at what point would you expect your home electrical consumption costs to increase based on more driving in the Leaf? In other words, should the average driver who buys a Leaf expect to see a noticeable increase in their electric bill to offset the decrease in their gasoline expenses?

I’ve been charging my Leaf mostly for free, since there are a few no-cost L2 chargers in town including in the Sam’s club parking lot. Mainly as a game, since the amount of free electricity you harvest (66 cents per hour parked) isn’t really worth seeking out the chargers unless you really need the extra range in that trip.

But to really answer your question, the battery holds 30 kWh ($3.00 worth of electricity), and this gets you about 110 miles of driving.

So a typical US ultra-car-commuter (1000 miles per month) would spend about $27 per month on fuel for the Leaf., compared to $150 at today’s prices for the average personal Racing Farm Truck like a Dodge Ram :-)

My electric bill went up 100% from $50 to about $100 with a much older model and less efficient leaf. I would have to fill up my car 3x/month at about $50/ time so my net savings was still $100/month. If I had more time on my hands I could have gotten free charges at different places but I charge it at night while I sleep at home. I did end up getting solar installed 12 months ago and now my savings has compounded.

Dude, how cool would it be to have MMM as your Uber driver? :) Thanks for sharing your spending, MMM! It’s a little tough to apply your spending situation to folks like me who are getting out of debt, but it’s so cool to see what it’s like at the end of the tunnel. :)

I’ve always wanted to see medical addressed here. My wife has had a non-life threatening condition since she was a child. Prescriptions and doctor’s bills were constant. Then she got cancer. Then she got cancer again. I completely own my house and several rental properties and I’ve got more than enough money to retire but am afraid to. Before the ACA we could not buy our own insurance and despite having a six figure rental and investment income ONE round of cancer would clean us out.

“I’ve seen bills you people wouldn’t believe” – Roy Batty

3 days in a standard hospital room ~ 19k
6hr surgery >100K
I forget what each round of chemo was, but it was >10K
Ever see those “I’m ready” Neulasta commercials? What you’re not ready for is what it costs. ~7k per shot.
Multiple rounds of chemo messes up your teeth. Wife is up to six dental implants. These have actually dropped considerably but will still run about 4k per.

Thankfully I’ve got a fun job playing with all kinds of fun prototype computer hardware that not only has good insurance but pays well. My max out of pocket is only 5K but dental is barely covered at all.

Hope I don’t sound like I’m complaining, but articles like the “There are no guarantees” one have me yelling “NO, WRONG!!! Cover your ass!!!” at my monitor.

Depending on your financial situation, health care situation and health insurance coverage….. it might be good to research overseas options …. sometimes they are cheaper … had a friend who did his treatment in Indonesia, … another in Taiwan, ….. don’t Americans sometimes go to Mexico for this purpose …. God Bless, a Canadian in China :)

You hit on what should be a significant concern in the FIRE community that, as I look around, is often not mentioned at all (until, like with MMM, something unexpected happens). Perhaps there has been plenty written about this, I’ve just not seen it.

Access to health care (as opposed to access to health insurance) is, I think, extremely problematic in the US. And it’s getting worse as we convulse from ACA to AHCA to who knows what.

In the mean time, I’d like MMM to clarify his use of the word “artificially” in the sentence he penned in this blog, “Adding in our artificially high medical costs is what did this budget in.” What exactly is artificial in his medical costs? Perhaps the word “unexpectedly” is more appropriate?

Getting one’s annual expenses under control and at about $25,000 or $30,000 is difficult but doable as MMM demonstrates year after year. But, accidents happen and so too do medical conditions, even to people who ride their bikes everywhere, are physically active, and eat right.

MMM’s budget was “done in” this year by a very significant percentage because of (1) earning too much money to qualify for subsidized health insurance under ACA and (2) an accident.

How many FIRE’s budgets would be “done in” if they had to absorb a $3000 – $4000 unexpected medical expense this year and again next year?

Random negative events are no different than the sequence of returns risk on investment after retiring. The best you can do is build in some margin of safety on your investment/budget and hope to avoid the worst case scenario early in retirement.

My own approach to this will be pretty straightforward: if something bad happens to me that requires a substantial outlay, I will simply cut spending somewhere else to compensate for it. My budget will be pretty flexible and allow for such things, which is precisely the point – you have to be ready to adapt to circumstances life throws at you when retiring for 30+ years.

I’ve been doing a lot of reading up on health and diet as a preventive measure. If your wife has cancer that’s already metastatized, I think it might be a good idea to do everything in your power to focus on living and eating healthy, especially if you’re already basically FI. Plenty of people in the medical research consider something like 70-80% of cancer as being preventable and attributable to lifestyle/dietary choices. Even if she’s part of the unfortunate 20-30%, dietary choices are linked to a host of other diseases and ailments.

Some sources that you might find useful:
-http://www.chrisbeatcancer.com/
-“The C-Word” (documentary available on Netflix US)

We have a bronze health plan. My wife broke her leg which needed surgery. Hospital charged insurance $50k. However, insurance ‘negotiates’ the rate, so the final bill was $28k. Our out of pocket was about $7k since that is the annual max you pay out with insurance. I am in the USA.

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